FE D E R A L R E S E R V E BANK O F N EW YORK

[ Circular No. 8 8 0 5 * 1 April 21,1980 J

CONSUMER CREDIT RESTRAINT

Technical Amendments to Subpart A

T o A l l M e m b e r B a n k s , a n d O th e r s C o n ce rn ed , in th e S e c o n d F e d e r a l R e s e r v e D i s t r ic t :

The Board of Governors of the Federal Reserve System has issued two technical amendments to Subpart A of its regulation on “Credit Restraint.” Subpart A of the regulation deals with con­sumer credit. Following is the text of the Board’s announcement:

The Federal Reserve Board today announced two technical amendments to its consumer credit restraint program. They deal with changes in the terms of certain consumer credit accounts and with the relationship of the program to maximum finance charge rates permitted by State and Federal laws and Department of Energy rules.

The amendments are extensions of revisions in the consumer credit restraint regulations announced April 2 establishing uniform national rules for creditors to follow if they impose or increase finance or other charges or make certain other changes in the terms of consumer credit accounts.

The further revisions announced today, effective April 14:1. Clarify that the requirements for changes in the terms of consumer credit accounts apply not only

to open-end accounts (where the consumer may pay the balance due in installments), but also to open accounts (such as 30-day accounts where the consumer may incur new debt from time to time but is expected to pay the full amount due upon being billed).

2. Clarify that (a) the provisions for changes in the terms of consumer credit accounts do not affect the maximum finance charge permitted under State laws, or the maximum rates permitted under the Depository Institutions Deregulation and Monetary Control Act of 1980, but that (b) Federal finance charge limitations for other covered creditors, such as regulations governing oil company credit programs, are superseded to the extent they are inconsistent with the Board’s rules.

Enclosed is the text of the amendments. Legal questions regarding the Consumer Credit Restraint Program may be directed to Donald L. Bittker, Assistant Counsel, Legal Department (Tel. No. 212-791-5036) ; other questions may be directed to the Consumer Credit Reports Unit (Tel. Nos. 212-791-7721 through 7725).

A nthony M. Solomon,President.

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Board of Governors of the Federal Reserve System

CREDIT RESTRAINT

A M E N D M E N T S T O S U B P A R T A — C O N S U M E R C R E D I T(effective April 14 , 1980)

AGENCY: Board o f G overnors o f Che F ed e ra l R eserve System .

ACTION: F in a l R ule.

SUMMARY: On A p ril 2 , 1980, th e Board amended i t s consumer c r e d i t r e s t r a i n tr e g u la t io n (45 F ed e ra l R e g is te r 24444, A p ril 10, 1980) to perm it covered c r e d i to r s to change c e r t a in term s r e l a t i n g to c e r t a in c r e d i t acco u n ts i f two c o n d it io n s were m et. F i r s t , the c r e d i to r would have to m ail or d e l iv e r a w r i t t e n n o tic e o f the proposed change to each a f fe c te d account h o ld e r a t l e a s t 30 days b e fo re th e e f f e c t iv e d a te o f the change. Second, the c r e d i to r would have to a llow the account h o ld e r to repay the b a lan ce o u ts ta n d in g on the e f f e c t iv e d a te acco rd in g to the e x i s t in g term s u n le ss the consumer made a c r e d i t pu rchase o r o b ta in e d a c r e d i t advance on o r a f t e r th a t d a te ; in which c a s e , the new term s would app ly to the o u ts ta n d in g b a lan ce p lu s new c r e d i t .

The Board is now making two te c h n ic a l amendments to i t s A p ril 2 amendment. The f i r s t makes c l e a r th a t the change in term s req u ire m en ts app ly no t on ly to open-end c r e d i t acco u n ts where the consumer may pay the b a lan ce due in in s ta l lm e n ts s u b je c t to a f in a n c e c h a rg e , bu t a lso to open acco u n ts (such as s o - c a l le d 30-day acco u n ts r e f e r r e d to a t 45 FR 17928) where the consumer may make c r e d i t pu rch ases o r o b ta in c r e d i t advances from tim e to tim e , ye t is expected to pay in f u l l upon being b i l l e d . The in te n t o f th e A p ril 2 amendment was to cover bo th types o f acco u n t.

The second te c h n ic a l amendment c l a r i f i e s th a t th e change in terras p ro v is io n does not a f f e c t the maximum fin a n c e charge r a te p e rm itte d by S ta te law o r , fo r d e p o s ito ry i n s t i t u t i o n s , th e maximum r a te allow ed by T i t l e V o f th e D e p o s ito ry I n s t i t u t i o n s D e re g u la tio n and M onetary C o n tro l Act o f 1980 (P u b lic Law 9 6 -2 2 1 ). I t makes c l e a r , how ever, th a t F ed era l f in a n c e charge l im i t a t i o n s fo r o th e r covered c r e d i t o r s , such as the D epartm ent o f E n e rg y 's

For this Regulation to be complete, retain:1) Regulation pamphlet entitled “Credit Restraint,” adopted effective March 14, 1980.2) Subpart D, effective March 28, 1980.3) Amendment to Subpart B, effective March 28, 1980.4) Amendment to Subpart A (C h a n g e in T e r m s o f O p e n -E n d C r e d i t

A c c o n n ts ) , effective April 2, 1980.5) Amendments to Subpart A ( A l te r n a t iv e B a s e ) , effective April 2, 1980.6) This slip sheet.

[ E nc. C ir. N o. 8805] ( o v er )

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r e g u la t io n s govern ing o i l company cred § 2 2 9 .6 (a ) o f the c r e d i t r e s t r a i n t reg v is io n a u th o r iz e s an a c t io n o th e rw ise th e in te n t o f the A p ril 2 amendment as supp lem en tary in fo rm a tio n (45 FR 24444

EFFECTIVE DATE: A p ril 14, 1980.

FOR FURTHER INFORMATION CONTACT: Natho r David A. M yers, A tto rn e y , D iv is io n Board o f G overnors o f th e F ed e ra l Rese (2 0 2 -4 5 2 -3 0 0 0 ).

SUPPLEMENTARY INFORMATION: S ince thethe consumer c r e d i t r e s t r a i n t r e g u la t i and do no t change th e su b s ta n c e o f th e p u b l ic a t io n o f the changes fo r p u b lic ness is n e i th e r n e c e s sa ry nor re q u ire d p u rsu an t to i t s a u th o r i ty under the Cr 1909), as im plem ented by E x ecu tiv e Ord 12 CFR P a r t 229, S ubpart A, §§ 2 2 9 .6 (a 1980, as fo llo w s :

i t program s, a re superseded by u la t io n to the e x te n t th a t th a t p ro - p ro h ib i te d by F ed e ra l law. That was

in d ic a te d in th e F ed e ra l R e g is te r ) .

a n ie l E. B u tle r , A sso c ia te D ir e c to r , o f Consumer and Community A f f a i r s , rve System , W ashington, D.C. 20551

two amendments th a t are be ing made to on a re m ere ly i n t e r p r e t a t i v e in n a tu re

r e g u la t io n , the 3oard f in d s th a t comment or a d e lay in t h e i r e f f e c t i v e -

under 5 U .S .C . § 5 5 3 (b ). T h e re fo re , e d i t C o n tro l Act (12 U .S.C . §§ 1901- e r 12201, the Board h e reb y amends ) and ( b ) ( 1 ) , e f f e c t iv e A p ril 14 5

* ★ *

(a ) N o tw ith s ta n d in g the term s o f any c r e d i t agreem ent o r the p ro v is io n o f any o th e r law , a covered c r e d i t o r , w ith r e s p e c t to i t s open- end o r o th e r open c r e d i t a c c o u n ts , may (1 ) impose o r in c re a s e any fin an c e o r o th e r c h a rg e , (2 ) change the method o f com puting the b a lan ce upon which ch a rg es are im posed, o r (3) in c re a s e the re q u ire d minimum p e r io d ic paym ent, i f the fo llo w in g two c o n d it io n s a re m et. * * *

( b ) (1 ) T his s e c t io n does no t a u th o r iz e a covered c r e d i to r to impose a r a te o f i n t e r e s t o r f in a n c e charge in ex cess o f the maximum p e r­m itte d by S ta te law, nor does i t a u th o r iz e a d e p o s ito ry i n s t i t u t i o n (a s d e f in e d in s e c t io n 19(b) o f th e F e d e ra l R eserve Act as amended by the M onetary C o n tro l Act o f 1980) to impose a r a te o f i n t e r e s t or f in an ce ch arg e in ex cess o f th e maximum p e rm itte d by F ed era l law.

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